Understanding Tax & Property

Tax & Property

Property in England and Northern Ireland

Stamp Duty Land Tax (SDLT)

SDLT was introduced on 1 December 2003 and replaced Stamp Duty regarding land transactions.

SDLT is a tax generally payable on purchasing or transferring land and property in England and Northern Ireland. It is also payable on certain lease premiums.

Property purchasers can only register their ownership at the Land Registry if they have a Land Transaction Certificate issued by HMRC. This certificate will only be issued when the purchase has been reported to HMRC on an SDLT return. All property transactions valued at £40,000 or more must be so reported.

SDLT is usually chargeable based on the cash value of the transaction. However, the definition of ‘consideration’ is very wide and intended to catch all sorts of situations where value might be given other than in cash, such as if the purchaser agrees to do certain work on the property or to take on the mortgage debt secured on a property.

Rates of SDLT

SDLT rates are applied on a graduated basis, like Income Tax. If, for example, you purchased a property for £275,000, the SDLT charge would be £3,750.

SDLT is payable at the following rates on residential properties:

The SDLT zero rate band was increased from £125,000 to £250,000 effective 23 September 2022. This removed the 2% band for properties ranging from £125,000 to £250,000. These changes are also temporary and will revert to the old rates on 31 March 2025.

No SDLT is payable for first-time buyers purchasing up to £425,000. The relief also applies to the first £425,000 for purchases up to £625,000. No relief is available for first-time buyers spending more than £625,000 on a property.

These changes were initially announced as permanent but were later changed to a temporary measure. The temporary changes in the first-time buyer's relief are due to end on 31 March 2025, when the figures applied before 23 September 2022 are due to come back into force. A number of requirements must be met in order to qualify for the relief.

A higher SDLT rate applies to purchases of additional residential property, such as buy-to-let and second homes. The rate is 3% higher than the current rates.

The higher rates apply to purchases of additional residential properties in England and Northern Ireland. The higher rate does not apply to individuals who own only one residential property, irrespective of the intended use of the property. There are also some other limited reliefs from the surcharge.

A special 15% rate is applied to residential properties held in a 'corporate envelope' costing over £500,000.

A 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland applies.

The current rates of SDLT for the purchase of non-residential property are as follows:

Property in Scotland

Scottish Land and Buildings Transaction Tax (SLBTT)

The SLBTT came into force on 1 April 2015 and replaced SDLT in Scotland. There are two sets of rates for residential and non-residential properties.

These rates are applied on a graduated basis, and the portion of the purchase price within each tier is charged at the applicable rate.

The zero-rate band is extended to £175,000 (from £145,000) for first-time buyers. This limit also applies to first-time buyers buying a property above £175,000, who will benefit from the relief on the portion of the price below the threshold.

These rates are subject to a 6% (4% before 16 December 2022) surcharge if a company or an individual buys a residential property or a second or subsequent residential property.

Property in Wales

Welsh Land Transaction Tax (WLTT)

The WLTT was launched on 1 April 2018. Generally, a transaction will be subject to WLTT if the land is in Wales. There are two sets of rates for residential and non-residential properties.

These rates are applied on a graduated basis, and the portion of the purchase price within each tier is charged at the applicable rate.

There are currently no further measures specifically targeting first-time buyers in Wales.

There is a WLTT higher rate supplement of 3% on purchases of additional residential properties.

Annual Tax on Enveloped Dwellings (ATED)

An Annual Tax on Enveloped Dwellings (ATED) came into effect on 1 April 2013. The annual tax is payable by certain non-natural persons who own interests in dwellings valued at more than £2 million. This provision affects certain companies, partnerships with company members, and managers of collective investment schemes described in the legislation as non-natural persons (NNPs).

From 1 April 2024, ATED is chargeable for 2024-25 on property valued at:

• More than £500,000 but not more than £1 million – £4,400
• More than £1 million but not more than £2 million – £9,000
• More than £2 million but not more than £5 million – £30,550
• More than £5 million but not more than £10 million – £71,500
• More than £10 million but not more than £20 million – £143,550
• More than £20 million – £287,500

There are certain NNPs which may not be required to pay the ATED, such as:

• property development, investment rental and trading businesses;
• residential properties open to the public for at least 28 days a year on a commercial basis;

• residential properties held for employee accommodation;
• residential properties owned by a charity and held for charitable purposes;
• working farmhouses;
• diplomatic properties; and,
• some other publicly-owned residential properties.

For the ATED period 1 April 2024 to 31 March 2025, both the return and payment were due to be made by 30 April 2024. A copy of the ATED return is available online, and HMRC has published a comprehensive notice containing information about ATED and instructions for completing the form.

Replacement of Domestic Item Relief

The replacement of domestic items relief has been in place since April 2016. It allows landlords to claim tax relief when they replace movable furniture, furnishings, appliances, and kitchenware in a rental property. The relief only applies when landlords actually replace furniture, furnishings, appliances, and kitchenware. Landlords must also ensure they keep a record of any capital expenditure incurred on an investment property.

It is also important to ensure that any domestic items bought with the property are listed in the contract. This means relief will be available when these items are replaced. In addition, reducing the stamp duty payable in certain circumstances may be possible by allocating a reasonable proportion of the purchase price for any domestic items included in the sale. No relief is available for the initial cost of domestic items purchased for a new or existing rental property.

Page updated on 13/05/2024.